Oracle slaps Oregon with a lawsuit over troubled Obamacare website

Oracle has sued Oregon for breach of contract, seeking more than US$20 million in fees the state is withholding for its work on Cover Oregon, a troubled insurance exchange website developed as part of President Barack Obama's health care policy overhaul.

The move is a preemptive strike by Oracle against Oregon, whose governor, John Kitzhaber, has advocated suing Oracle.

Oracle had already claimed Oregon officials were conducting a "smear campaign" meant to hide their own shortcomings. The vendor fleshed out that allegation at length in its complaint, which was filed Friday in U.S. District Court for the District of Oregon.

"Oracle worked at Oregon's direction on [Cover Oregon]," and the software has helped hundreds of thousands of Oregonians enroll in health insurance or Medicaid, the complaint states. "That, however, is a fact most Oregonians do not understand."

When problems with the site were reported upon its Oct. 1, 2013, go-live date, "public officials chose not to give a measured, fully informed response," the complaint adds. Instead, they decided to "blame someone else," namely Oracle, according to the filing.

"While flogging Oracle publicly, Cover Oregon continued privately to ask for Oracle's help," it adds. "(Indeed, it continues to this day to seek Oracle's technical help with the project)."

A key bone of contention in the dispute centers around the fact that Oregon hired Oracle on a time-and-materials basis, with the state serving as its own systems integrator.

"That decision was akin to an individual with no construction experience undertaking to manage the processes of designing and building a massive multi-use downtown skyscraper without an architect or general contractor," Oracle said.

Another alleged flaw in the state's approach: It decided to build Cover Oregon at the same time it was embarking on a major IT modernization project for other aspects of its health and human services operations.

Overall, the Cover Oregon project suffered from widespread "bureaucratic dysfunction," with various state agencies unable to work effectively together, it adds. State officials also wouldn't heed repeated warnings that the project was in trouble, Oracle alleges.

Other problems included a propensity by state officials to "change their minds frequently about the work they wanted performed," with Oracle programmers asked to make on-the-spot changes to code, according to the complaint.

What seems clear is that Cover Oregon's issues reached Oracle's attention at a high level. The company assigned chief corporate architect Edward Screven, a longtime Oracle employee who reports directly to CEO Larry Ellison, to work on righting the ship, albeit ultimately to no good end.

A number of Oracle employees working on-site reported that Reynolds stated he had given himself administrator privileges and made changes to the production environment on his own, without following proper procedures, Screven wrote in an email.

"If you have made such changes, please send a written description of each change, including when you made it," Screven said. "Also, please do not make any more changes. [E]ven trivial changes can result in confusion that leads to serious mistakes down the road, and even an expert can make mistakes."

Reynolds' response to Screven was terse.

"I thought Cover Oregon paid for and owned the system ...," he wrote. "Thanks."

Oracle maintains it hasn't been paid in full for its product and is seeking at least $23 million in restitution for the work it performed, along with additional damages.

A spokesperson for Kitzhaber didn't immediately respond to a request for comment on Monday.

But Kitzhaber spokeswoman Melissa Navas told the Oregonian newspaper that Kitzhaber "is aware of the lawsuit and isn't surprised by it." The state's attorney general will review the complaint "and continue to pursue legal remedies on behalf of the State," Navas added.

"The Oracle lawsuit does not affect Cover Oregon as we move forward to ensure Oregonians can enroll in health insurance in November," a Cover Oregon spokeswoman said via email. "It also doesn't affect Cover Oregon daily operations or customers in any way."

Oracle "is making a pretty strong case" for itself in the complaint, said analyst Michael Krigsman, CEO of consulting firm Asuret and an expert on why many IT projects struggle and fail.

The lawsuit represents a few important things for Oracle, Krigsman added. "It's the money, it's their reputation, and number three is to send a signal to the market that they're not simply going to roll over, they're going to take an aggressive stance in this type of situation," he said.

That's not to say Oracle is entirely without fault, Krigsman added. Independent reports on Cover Oregon have found fault with both Oracle and state officials.

"With these complex IT projects most of the time it's virtually impossible to say that blame or responsibility lies completely on one side or the other," he said. "The two sides are very intertwined during the execution of the project."

Copyright 2018 IDG Communications. ABN 14 001 592 650. All rights reserved. Reproduction in whole or in part in any form or medium without express written permission of IDG Communications is prohibited.